LONDON/PARIS, Sept 24 (Reuters) – Britain’s biggest banks have completed the world’s first transactions using tokenised deposits to move money between themselves, a boost for a blockchain-based version of commercial bank money that proponents say offers a safer alternative to stablecoins.
Banks and other financial institutions have for more than a decade been looking for ways to introduce blockchain into their own IT systems, by creating crypto tokens representing assets such as deposits, stocks, bonds and currencies. However, the development by each lender of its own blockchain-based system had prevented transactions between institutions.
Lloyds [RIC:RIC:LLBP.UL], NatWest (NWG.L), opens new tab and Barclays (BARC.L), opens new tab have now carried out two mortgage transactions using tokenised deposits, their industry association UK Finance told Reuters, while a trio of banks including HSBC (HSBA.L), opens new tab this week ran a person-to-person transaction simulating an online marketplace purchase.
The trials are part of the “Great British Tokenised Deposit” project run by UK Finance, after participating banks committed to the initiative through a pilot launched last year.
Banks say moving tokenised assets could be cheaper and more efficient than using existing systems, while the Bank of England has said it would rather banks innovate with tokenised deposits instead of stablecoins – a kind of crypto token pegged to the US dollar or other currencies.
Tokenised deposits have the same legal status as money deposited in a bank account, whereas stablecoins are typically issued by a private company and take money out of the banking system, raising concerns about the cost of credit and monetary sovereignty.